A planned $7.7 billion merger of Vodafone Group Plc’s struggling Australian business with TPG Telecom Ltd. was blocked by the regulator in a bungled announcement published early that sent stocks tumbling.
“The proposal would substantially lessen competition for mobile-phone services in an already concentrated market,” the Australian Competition and Consumer Commission said in a statement on Wednesday. “TPG is Australia’s best -- and probably the last -- chance to gain a new cellular network operator,” Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims said in the statement.
A protracted legal battle between the companies and the regulator now looms. TPG and Vodafone Hutchison Australia Pty Ltd, Vodafone’s unprofitable mobile-phone venture with CK Hutchison Holdings Ltd., said they’re still committed to a union and will challenge the ACCC’s decision in the Federal Court.
Hanging in the balance is a proposal to create a new Australian tech giant selling mobile phone and broadband services that’s worth an estimated $10.9 billion ($7.7 billion). “If the deal is blocked, former Australian phone monopoly Telstra Corp. and Optus (owned by Singapore Telecommunications Ltd.) would only gain more power,” TPG said. The ACCC’s decision must be challenged, it said.
Scuppered Solution
The ACCC’s decision also damages Vodafone’s plan to breathe new life into a mobile-phone partnership that has struggled to make inroads in Australia. In almost a decade of operations, Vodafone Hutchison won only 19 percent of the local mobile-phone market.
There had been speculation that Vodafone would look to exit Australia completely. The U.K. phone giant’s planned union with TPG was an attempt to salvage something from an entity that some analysts said was essentially worthless.
“We believe the merger with TPG will bring very real benefits to consumers,” Vodafone Hutchison Chief Executive Officer Inaki Berroeta said in a statement. “The businesses have little overlap and can deliver more for Australian consumers together than they can alone,” he said.
The ACCC, which typically publishes its rulings when shares aren’t trading, fumbled the release of its decision, sending TPG stock into meltdown. Scheduled for release on Thursday, the decision was briefly visible on the regulators website on Wednesday afternoon -- before it was removed. The ACCC later confirmed its opposition to the deal and blamed a technical error for the inadvertent publication.
Its embarrassing, Sims said in a telephone interview, adding the regulator had started an investigation. He defended his opposition to the deal, saying the proposed tie-up was a bridge too far.
TPG Telecom tumbled 14 per cent on Wednesday, while Hutchison Telecommunications Australia Ltd., home to CK Hutchisons stake in the mobile phone company, lost 28 per cent. Telstra fell 2.1 per cent as investors bet an independent TPG would represent more of a competitive threat.
“TPG has a proven track record of disrupting the telecommunications sector and establishing itself as a successful competitor to the benefit of consumers,” Sims said in a statement. TPG is likely to be a vigorous and innovative supplier of mobile services in Australia.